Digging Deeper Into Health Spending Data

AHIP recently published its annual “Your Health Care Dollar” analysis. Not surprisingly, AHIP's lede is focused on prescription medicines: “Medication and medical services accounted for 81.6 cents of the health care premium dollar; 21.5 cents are used to pay for prescription drugs.”

As we know from the National Pharmaceutical Council's peer-reviewed research (2019), it’s important to understand the data behind the numbers and put it into the proper context. Although it isn’t the most robust analysis, AHIP has changed and improved on its methodology since NPC highlighted issues with it (See “Context Matters on Health Statistics,” 2018). 

Among the methodologic reasons AHIP’s drug spending figure is different from other estimates for the share of spending attributable to drugs:

  • The primary reason this “drug-share of spending” estimate (21.5%) is larger than the estimate in NPC’s research (16.3%) is that it focuses solely on the commercial market, excluding populations like Medicare and Medicaid.
  • The AHIP drug-share of spending estimate does not include medications administered in the hospital and other facilities, which means it underestimates the total share of spending attributable to drugs.
  • The 81.6% estimate encompasses all medical services, including medications, in-patient hospital costs, out-patient hospital costs and doctors’ visits.

Importantly, the AHIP analysis doesn’t show us the value of spending on prescription medicines and its benefit to patients. Looking at spending over time, prescription medicines – along with public health campaigns – have provided a significant “bang for the buck.” (See NPC’s studies, “What’s Been the Bang for the Buck?” and “The Effect of Medical Technology Innovations on Patient Outcomes, 1990–2015: Results of a Physician Survey.”)

What NPC has written before still holds true today: “In addition to AHIP’s estimate, there are a variety of prescription medicine and health care spending statistics being used by different organizations or being reported in the news. Regardless of the statistic cited, it’s important that health care stakeholders and policymakers have the proper context to ensure those statistics aren’t misinterpreted or used inappropriately.” Doing so requires digging deeper into the data that’s behind those numbers to ensure policy discussions about drug spending in the U.S. are not misinformed. 

Need additional context? Check out NPC’s previous research, blog and webinar on the topic.